In this article
One of the most important questions every store owner must answer is: how much do I need to sell each month to cover all my costs? The answer is called the break-even point, the point where you neither make nor lose money. Every sale after that adds real profit.
Two types of costs
Fixed costs
The expenses you pay every month regardless of sales, such as your store platform subscription, hosting, software, salaries and any rent. Let’s say they total 1,500 per month.
Variable costs
Costs linked to each sale, such as the product cost, packaging, shipping, payment fees and commissions. Let’s say they are 25 per order.
Contribution margin
The contribution margin is what remains from each sale after variable costs: the amount that “contributes” to covering fixed costs. If the average order price is 55 and variable costs are 25, the contribution margin is 30 per order.
The break-even formula
Orders needed = fixed costs ÷ contribution margin per order
In our example: 1,500 ÷ 30 = 50 orders per month. You need 50 orders to cover your costs, and the 51st order is your first real profit. In sales: 50 × 55 = 2,750 per month.
Where do ads fit in?
If your ad budget is fixed each month, add it to fixed costs. If you measure it as a cost per order, add it to variable costs. Suppose each order costs you 10 in ads: the contribution margin drops to 20 and the break-even point rises to 75 orders. This shows why advertising cost has such an impact on profitability, and why you should track it with our ROAS calculator.
How to lower your break-even point
- Raise prices: a small increase lifts the contribution margin directly. Adding 5 in the example lowers the break-even point from 50 to 43 orders.
- Cut variable costs: negotiate shipping rates and buy packaging in bulk.
- Increase average order value: bundles and complementary products.
- Review subscriptions: many stores pay for tools they don’t use.
Break-even for digital products
Digital products have very low variable costs, usually only platform and payment fees, so the contribution margin is high and the break-even point low. The real cost, however, is design and production time, so include the value of your time in fixed costs for a realistic picture.
Summary
Recalculate your break-even point every month or whenever prices or costs change. This number gives you a clear sales target and helps you make pricing and advertising decisions with confidence. To calculate each product’s margin quickly, use our profit margin calculator.
